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Differential Analysis for a Lease or Sell Decision: Inman Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $399,100 less accumulated depreciation of $120,600) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700. Prepare a differential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.

Differential Analysis for a Lease or Sell Decision: Inman Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $399,100 less accumulated depreciation of $120,600) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700. Prepare a differential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...
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Differential Analysis for a Lease or Sell Decision: Inman Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $399,100 less accumulated depreciation of $120,600) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700. Prepare a differential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.
Transcribed Image Text:Differential Analysis for a Lease or Sell Decision: Inman Construction Company is considering selling excess machinery with a book value of $278,500 (original cost of $399,100 less accumulated depreciation of $120,600) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,100 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700. Prepare a differential analysis, dated January 3, 2014, to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery.
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